According to sources this is being done for better valuations, as the newly formed companies plan to tap the capital market from the end of next year. At present, Reliance Retail is a wholly owned subsidiary of Reliance Industries Ltd and operates the various verticals.
Company officials expect Reliance Fresh, which has already been hived off, to break even by March 2008. The company, which recently ran into opposition in a few areas and chopped off fruits and vegetables from its stores in states like Orissa, currently operates 335 stores across the country.
The various hived-off business entities would nurture and develop their own vendor base to match individual specifications and volumes. The move would help Reliance ramp up its rollout and operations quickly as, according to analysts, the industrys main obstacle is the lack of a strong vendor base.
The move towards hiving off units to unlock shareholders value is akin to the telecom sector where some companies have started hiving off their tower businesses into separate companies and tapping the capital market.
Reliance is eyeing $20 billion from retail by 2011. When contacted, a company spokesperson declined to comment.